Yesterday #snowflake IPO ~ $120. Closing share price ~ $250

Closing Mcap~ $70 bn
P/E: N/A
ttm P/S on close ~ 175x

By all reads / hears: Snowflake is a great biz & not a fly by night operator

So was Red Hat that did a IPO in 1999 : a short thread👇
In Aug '99 #RedHat went public. IPO~ $14. IPO day close~ $52.

Outstanding shares end August ~ 66.6 mn. ttm revenue ~ $13 mn. Loss making

So on IPO day close:

Mcap $3.5 bn
P/E: N/A
ttm P/S ~ 270x
By Nov/Dec the shares had touched ~ $140. Mcap > $10 bn

Due to exercise of ESOPS & conversion of preferred shares to common stock the total outstanding shares jumped to 153 mn by end Feb 2000

28 Feb 1999 shares were trading down at ~ $44. Mcap ~ $6.7 bn
Red Hat wasn't one of the many crappy companies that did an IPO in 1999. en.wikipedia.org/wiki/Red_Hat

from 1999 to 2108 its revenues went up ~ 275x a cagr of ~ 32%

it turned profit making & ended 2018 with almost $400mn profit

It was acquired by IBM in end 2018 for$34 bn
While company's biz grew at an amazing pace over years, the experience of shareholders was vastly different. Worst off were those who bought during 1st few months frenzy & held on - egged on by 'experts' confirming a 'new normal' :)

These folk took 12-18 yrs to break even !!
IPO boom of 1999 & subsequent bust was real. I See parallels in 2020. Many gr8 businesses r IPOing in US. eg #Snowflake. But frenzy causing absurd valuations. Fortunes may b made in short term. But if u don't get out in time & fall 4 'new normal' narratives - u will b minced meat
Some will give eg of Amazon: which even if bought at peak of '99 & held on, would've been a multi bagger

But remember: even Amazon crashed like mad in dot com bust

Patiently wait out a better price 2 buy gr8 cos that r currently at absurd valuations due to frenzy

That's it :)

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More from @tapak7

3 Sep
#vodaidea is a delight to analyse from two perspectives: 1) #gametheory and 2) Soro's #reflexivity theory

some thoughts...
Competition would like Vodaidea gone. But Vodaidea has bought itself a couple of yrs of survival from AGR verdict as they will be able to raise enough funds to last a couple of years by convincing board that 'as ARPU's rise things will get better'
To kill Vodaidea competition needs to keep ARPUs low for 2 more years. But competition itself doesn't make enough money at these ARPUs. So will they want to self inflict pain for 2 more yrs?
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22 Mar
Forced selling by NBFC's who have loaned against shares (LAS) is exacerbating sell off in cash mkts. There is a case for RBI to reduce margin requirments for LAS to mitigate some of this stress with little impact to lenders @RBI @nsitharaman @FinMinIndia

I explain:
Currently RBI mandates that a minimum 50% LTV be maintained at any point for LAS. So if one borrowed 50 against share worth 100, then if share falls to 80, investor should bring in additional 10 as collateral. OTH, if share goes to 120, investor can borrow an additional 10!
With this rigid margining system, in a rapidly falling market, NBFCs r forced to sell collateralised shares if clients can't meet margin requirements within mandated time frames. While forced selling is theoretically possible, r markets clearly lack ability to absorb this selling
Read 11 tweets

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